ABI scraps plans to remove TPD
Share
The Association of British Insurers has scrapped its plans to remove total permanent disability from critical illness plans.
In its critical illness statement of best practice, the trade body proposed to remove TPD and replace it with a set of new definitions. However, members rejected the proposal in their responses to the consultation paper.
Assistant director of health and protection Nick Kirwan says: “We don’t have a mandate to ban TPD in it’s current form, even if we were to come up with some other definition or set of replacement conditions.
“The feedback was very divided, almost 50/50, with members saying they were very worried about that.”
He added: “Bearing in mind that we would be restraining members, there are some competition issues there as well and therefore we would have needed a universal mandate for us to be able to remove it. That proposal is off the table now.”
Kirwan says members agreed to the ABI’s plans for definition changes in other areas, including children’s cover. He also said members believed that work around TPD must continue, with an emphasis on consumer and adviser education.
He said: “We asked a question about education and whether we need to do more and everybody said yes. It is educating the customers in particular to make sure that they know what they are buying . But of course the route to the customers is partly through advisers and sales forces, so literature and other things we will need to think about. Member firms can lead on that one.”
Kirwan says a meeting will be held on Friday to thrash out eight options which the ABI is now proposing to its members. He says: “Given where we are with TPD we need to look at options put forward and see if there is a consensus.”
Options include a different set of definitions to replace TPD, standardise TPD, remove back and mental conditions from TPD or ban TPD altogether, which Kirwan says members will reject.
Other options include a hybrid definition combining income protection and CI, a task-based definition or maintain the status quo and enhance education around TPD.
Last month Money Marketing revealed that the ABI is likely to hold another consultation on its proposals to scrap TPB from critical illness policies after negative feedback.
If you enjoyed this article, sign up here to receive daily email updates from Money Marketing and Follow @_moneymarketing
Readers' comments (1)
Phil Veale | 20 Nov 2009 6:52 pm
An inordinate time, and therefore money, has been spent on this issue. Although it is alleged that 50% of TPD claims have been declined, let's get some perspective. For the 1.5% of claims paid, this is great for those policyholders. However the 50% declinature rate is erroneous due to a high degree of double counting of claims where policyholders have put in early claims where total and permanent disability is not clear, but then subsequent claims are submitted and classed as "new". Much of the declinature can also be put down to policyholders believing TPD applied to own occupation, whereas significant numbers of early CIC policies included "any" occupation definition. So that is simply, a lack of clarity for the consumer.
TPD is a disability cover, not a critical illness cover. Consequently, it should be either a standalone benefit offering clarity of description, or aligned with income protection.
How does dropping TPD impact on CIC? It doesn't. TPD has often been seen as a "catch all" or "safety net" benefit. This means it has not had the attention to description perhaps it should have. Arguably, this is one of the contributory factors to the declinature figures, where the actual criteria is missed.
A proper "safety net" a customer should surely have is CIC, TPD and IP as well as death cover, which is sadly lacking for 50% of the UK population.
The bottom line is that the industry should be looking at the big picture opportunities, rather than the distractions!
Unsuitable or offensive? Report this comment